Pharmaceutical industry profile

Canada's pharmaceutical sector

The pharmaceutical sector is one of the most innovative industries in Canada. It is composed of companies developing and manufacturing innovative medicines and generic pharmaceuticals, as well as over–the-counter drug products. The sector is made up of a number of sub-sectors that service different market segments. These include brand-name pharmaceutical companies, generic drug firms, biopharmaceutical small and medium sized enterprises (biopharmaceutical SMEs), and contract service providers (CSPs).

Size and structure of the industry

Pharmaceutical sales in Canada have a 1.9% share of the global market, making Canada the 10th largest world market. Since 2011, compound annual growth has remained positive at 2.8% (IMS Pharmafocus 2021).

Companies undertake research and development (R&D) to develop new or improved patented therapies, while others develop bio-equivalent copies of innovative drugs once patents expire. An emerging field of biologics and subsequent entry biologics (SEBs) is also taking shape.

Brand-name products account for 78% of Canadian sales and 30% of prescriptions. Generics account for the rest (IMS Pharmafocus 2021).

In 2017, the manufacturing portion of the sector employed and average of approximately 30,000 people and over the last 5 years, employment grew by 10.7% (Statistics Canada, CANSIM table 281-0023).

The industry is clustered mainly in the metropolitan areas of Toronto, Montreal and Vancouver.

Canadian drug sales

According to the 2016 PMPRB Annual ReportFootnote 1, from 2001 to 2016, total pharmaceutical sales (including non-patented over the counter medicines) in Canada have doubled to $25.5 billion, with 88.4% sold to retail drug stores and 11.6% sold to hospitals. Governments account for 42.7% of drug expenditures and private payers account for the remaining 57.3% (private coverage and individuals).

Cross-border internet pharmacy sales between Canada and the U.S. grew rapidly from 2000 to 2003, but have since steadily declined. They fell by 2.7% from 2015 to 2016, reaching $111.6 million, or 1.3% of total pharmaceutical products exports to the United States (IMS Health Pharmafocus 2021)..

Canadian Manufacturer's Sales of Patented and Non-Patented Drugs from 2004 to 2016 (Sales in $ billions)

R&D activities

Total business expenditures on R&D by Canadian pharmaceutical companies have fallen below $1 billion since 2011. From 2001 to 2016, industry R&D spending fell by 13%Footnote 2 (2016 PMPRB Annual Report).

However, the industry’s changing business model means that more R&D is being conducted externally and through partnerships. This includes investments in SMEs, venture funds and work with Canada’s growing CSP sector. A survey by Innovative Medicines CanadaFootnote 3and E&Y highlights many of these new investments, indicating additional innovationFootnote 4 expenditures of $450 million in 2016.

According to Research InfosourceFootnote 5, the pharmaceutical industry is third after the Aerospace and Information Technology (IT) sectors in R&D intensity. Twenty-one pharmaceutical and biotechnology companies are listed in the Top 100 Corporate R&D Spenders 2017 in Canada.

R&D costs per drug averaged US$1.4 billion over 12–13 years (Tufts Center for the Study of Drug Development). Full costing (including amortization of research failures and opportunity cost of capital) raised average costs significantly. A generic drug may take 2 to 3 years and requires $3 to $10 million of R&D to develop and prove equivalency with the original drug.

Total Canadian Pharmaceutical Business R&DFootnote 2 Expenditure (2004 - 2016)

International trade

From 2001 to 2017, pharmaceutical exports and imports between Canada and the rest of the world increased by 44% and 32% respectively.

More than half of Canadian production is exported (primarily to the United States) and a significant portion (68%) of the Canadian market is supplied by foreign imports (37% of imports from the U.S. and 40% from the EU).

Leading products

The top ten pharmaceutical products sold in Canada account for 15% of 2016 industry sales. Leading therapeutic categories include medicines for arthritis, liver health and asthma therapies (IMS Pharmafocus 2021)

Footnotes

Footnote 1

The Patented Medicines Prices Review Board (PMPRB) protects and informs Canadians by ensuring that the prices of patented medicines sold in Canada are not excessive and by reporting on pharmaceutical trends. To learn more visit Patented Medicine Prices Review Board

The PMPRB conducts an international price comparison of all patented drugs sold in Canada using seven foreign countries: France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States.